‘Carbon Footprint’ Gaining Business Attention

Newswise — About 75 percent of companies are actively measuring their “carbon footprint” – the range of carbon emissions from their operations, both direct and indirect, according to a report released today from The Conference Board. The report, based on a survey of 92 companies from various industries, looks at how companies are integrating greenhouse gas management into their overall business strategy.

More than 95 percent report that they see the prospect of a carbon-concerned future as creating both business risk and opportunity. One-half indicate they have a program in place to “actively reduce or offset greenhouse gas (GHG) emissions.” An additional 33 percent are developing such programs, while 15 percent have no plans to do so. Nearly all programs include reductions in energy use, while most (83 percent) are simultaneously focused on reducing GHGs. One-third are focused primarily on direct emissions – those resulting from fuel consumption or from materials used in their processes – while two-thirds include both direct and indirect emissions (primarily purchased electricity).

Fewer than 20 percent have attempted to measure their competitors’ carbon footprints, which may reflect the complexity and difficulty in doing so or indicate that the issue is not perceived as a major competitive challenge at this time.

Emissions Trading and the ‘Cost’ of Carbon
Carbon markets are new and modeled after the successful “cap and trade” markets for sulfur dioxide and nitrogen oxide. Emissions trading (in which a ton of emissions reduced by one company can be sold within a capped total to another company for a market price to offset emissions that the business cannot reduce at a competitive price) is emerging as an opportunity to potentially realize value from emissions reduction. Emissions trading is most common where required by law, with 33 percent engaged in regulated emissions trading in the European Union or in other areas where the Kyoto Treaty is in effect.

Only 15 percent of the companies now engage in voluntary emissions trading, but an additional 40 percent are considering it. Among those companies engaging in voluntary trading, motivations include: anticipation of potential regulation; to develop a track record for possible credit for prior emissions reductions; reputation benefits; to learn the process.

Companies were asked whether they consider the potential cost of carbon in planning for future projects. Nearly 30 percent do so now, and an additional 39 percent are considering including such costs in future planning.

Greenhouse Gas Emission Offsets and Credits
In addition to direct trading of emissions, other types of remedies are becoming increasingly available, such as creating or purchasing emissions offsets. Some organizations “sequester” carbon so that emissions released in one locale can be either consumed by growing vegetation or physically sequestered in geological formations. Nearly 44 percent of surveyed companies are either involved in sequestration projects or considering them.

Other approaches that companies are pursuing include the purchase of “green power” and renewable energy credits, including investment in “Clean Development Mechanism” projects in developing countries to create emissions credits (an approach created under the Kyoto Protocol).

“Uncertainties exist regarding how to accurately measure and verify reductions achieved through these diverse approaches,” the report notes. For example, offsetting emissions from purchased electricity through “green power,” such as wind, raises questions as to what is the mix of fuels used to generate the conventional electricity that is offset, possibly even down to the different grades of coal that might be used in various power plants in the system. Such uncertainties can create considerable risk for companies that are investing in different approaches. “For some companies, such risks are balanced by perceived reputation benefits that they hope to accrue by being innovators and leaders in addressing an issue that is becoming of increasing concern globally,” the report notes.

Governance and Carbon
Companies were asked how they address greenhouse gas emissions management within their companies. Fifty-six percent assigned a responsible senior executive to coordinate company actions, while 44 percent have not done so. At the board level, the issue is on the agenda at over two-thirds of the companies.

Because of the increasing public interest and concern about GHGs and carbon, about one-half of companies are currently reporting publicly. Of those that do not, 60 percent plan to report on their GHG management in the near future. Reporting is done through a variety of channels, including the sustainability or corporate citizenship report, websites, press releases, and annual reports.

Source: ‘Carbon Footprint’ an Increasing Management Concern
Executive Action No. 213, The Conference Board

About The Conference Board
Non-partisan and not-for-profit, The Conference Board is one of the world’s leading business membership and research organizations. The Conference Board produces The Consumer Confidence Index and the Leading Economic Indicators for the U.S. and other major nations. These barometers can have a major impact on the financial markets. The Conference Board also produces a wide range of authoritative reports on corporate governance and ethics, human resources and diversity, executive compensation, outsourcing, profiting from a mature workforce, and corporate citizenship. Our conference and council programs bring together more than 12,000 senior executives each year to share insights and learn from each other. Visit The Conference Board’s website at http://www.conference-board.org/.